Correlation Between IShares Basic and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Basic and First Trust at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Basic and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Basic Materials and First Trust Materials, you can compare the effects of market volatilities on IShares Basic and First Trust and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Basic with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Basic and First Trust.
Diversification Opportunities for IShares Basic and First Trust
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Basic Materials and First Trust Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Materials and IShares Basic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Basic Materials are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Materials has no effect on the direction of IShares Basic i.e., IShares Basic and First Trust go up and down completely randomly.
Pair Corralation between IShares Basic and First Trust
Considering the 90-day investment horizon iShares Basic Materials is expected to generate 0.83 times more return on investment than First Trust. However, iShares Basic Materials is 1.21 times less risky than First Trust. It trades about -0.56 of its potential returns per unit of risk. First Trust Materials is currently generating about -0.58 per unit of risk. If you would invest 14,620 in iShares Basic Materials on September 23, 2024 and sell it today you would lose (1,502) from holding iShares Basic Materials or give up 10.27% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Basic Materials vs. First Trust Materials
Performance |
Timeline |
iShares Basic Materials |
First Trust Materials |
IShares Basic and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Basic and First Trust
The main advantage of trading using opposite IShares Basic and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Basic position performs unexpectedly, First Trust can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Trust will offset losses from the drop in First Trust's long position.IShares Basic vs. Mast Global Battery | IShares Basic vs. Materials Select Sector | IShares Basic vs. Vanguard Materials Index | IShares Basic vs. SPDR SP Metals |
First Trust vs. First Trust IndustrialsProducer | First Trust vs. First Trust Consumer | First Trust vs. First Trust Financials | First Trust vs. First Trust Energy |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
Other Complementary Tools
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Transaction History View history of all your transactions and understand their impact on performance | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |